Blinkit now more valuable than Zomato's food delivery business: Goldman Sachs

The implied value of Blinkit, the troubled quick commerce startup that Zomato acquired in a fire sale in 2022, is now larger than that of Zomato’s core business (food delivery), analysts at Goldman Sachs said in a note published on April 25.

Goldman Sachs now values Blinkit at Rs 119 per share at a $13 billion equity valuation. That's higher than the food delivery business, which is being valued at Rs 98 per share.

The $13 billion valuation for the quick ecommerce delivery player is an upgrade from Goldman Sachs’ earlier estimate of $8 billion (according to a report on April 4). The upgrades were because of higher gross order value (GOV) estimates for Blinkit, which is tracking around 50 percent higher than estimates from one year ago, Goldman Sachs said.

Zomato had acquired Blinkit for $568 million in 2022 but since then the latter’s implied valuation has grown to $13 billion on the back of improved performance, according to Goldman Sachs analysts. On a year-on-year (YoY) basis, the valuation has grown by over 6X.

“We note that Blinkit’s implied valuation in our Zomato’s sum of the parts (SOTP) is (close to) $13 billion now, versus $2 billion in March 2023, with per share implied value of Rs 119 higher than food delivery, at Rs 98, for the first time,” the note said.

The quick delivery player is likely to see a compound annual growth rate (CAGR) of 53 percent in its GOV between the financial years 2024 and 2027, according to Goldman Sachs. This will also drive a 32 percent adjusted revenue CAGR for Zomato on a consolidated basis, it added.

Zomato's projected revenue CAGR is the highest within Goldman Sachs' food delivery and India internet coverage.

Goldman Sachs sees further potential for Zomato's valuation multiples to re-rate as it continues to improve profitability, particularly in the quick commerce business.

The brokerage highlighted that Zomato's EBITDA margin is the highest among global food delivery platforms and a similar scenario is likely to play out in the quick commerce business, whose margins can exceed those of the food delivery vertical.

Goldman Sachs maintained a 'buy' recommendation on the stock and raised the price target on the food delivery aggregator to Rs 240 from Rs 170 earlier. Of the 28 analysts that have coverage on Zomato, 24 have a 'buy' recommendation, while the rest have a 'hold' rating. The brokerage said the Street is still under-appreciating Zomato's growth and profit potential in the online grocery segment.

Shares of Zomato were trading at Rs 185.55, up 2 percent, at 12 pm on April 26.